Why turn energy companies into tax collectors?

Collecting taxes and distributing subsidies shouldn't be the job of Britain's energy companies, says Merryn Somerset Webb. That's what the state is for.

One of the things we didn't get on to in the Great Debate was energy prices and how they should be kept low.

My guess is that the audience (who seemed prone to wanting to nationalise everything) would have been keen on windfall taxes, price freezes and state takeovers. But it would seem to me that the best thing we could do is to stop using the energy companies as an extension of the state.

Look at the extra charges on your bill. There are various green charges and also various social charges. So you pay for the government-mandated subsidies to the renewable energy sector via your bill (£112 on average a year), and you also pay for rebates on energy to low income households (£11 a year), and for contributions towards insulating their houses too.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

All these things might be fine in one way or another. But they have nothing to do with the energy companies. You want to subsidise energy for the old and the poor? That's what the welfare state monster is for. We have it. So why don't we use it every time we find a new reason to redistribute cash from rich to the poor?

The same goes for the subsidies. They weren't mandated by the energy companies, so why make the energy companies collect and distribute them? This kind of regressive taxation (green subsidies tend to take from the masses and get paid to landowners) is surely the job of the state.

One of the things that people most want from the tax system in the UK is simplicity and transparency. Inventing new taxes and then trying to hide them behind energy company bills isn't exactly moving us along the right path.

Shifting the taxes off energy bills won't make their final cost any lower, but it will at least return their administration to the correct place. It would also make our energy bills just a tiny bit easier to understand and crucially be rather more honest.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.